Explained: What we can gauge from the the India-US interim trade framework

The United States and India unveiled an interim trade framework on Friday.

The framework lowers tariff barriers, redefines energy cooperation, expands technology and defence-linked trade, and sets the stage for a broader bilateral trade agreement that both sides have struggled to finalise for over a decade.

While the framework stops short of a comprehensive free trade agreement, officials in both Washington and New Delhi have positioned it as a critical stepping stone toward a full Bilateral Trade Agreement (BTA).

The interim framework also resolves months of friction over India’s energy purchases from Russia, recalibrates tariff structures on both sides, and introduces binding timelines to address non-tariff barriers that have long complicated trade flows between the two countries.

How the interim trade framework came together

The newly announced framework is directly linked to broader BTA negotiations that were formally launched on February 13, 2025, by US President Donald Trump and Prime Minister Narendra Modi.

Since then, negotiators from both sides have been working through contentious issues ranging from agriculture and pharmaceuticals to digital trade and industrial tariffs.

According to the joint statement released on Friday, the interim arrangement is intended to be reciprocal, balanced and focused on strengthening supply chain resilience. It is designed to be implemented swiftly while negotiations on the full trade agreement continue in parallel.

Under the decisive leadership of PM @NarendraModi ji, India has reached a framework for an Interim Agreement with the US. This will open a $30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen. The increase in exports will create lakhs of new job… pic.twitter.com/xYSjxML6kt

— Piyush Goyal (@PiyushGoyal) February 7, 2026

Officials described the framework as a response to both economic and strategic imperatives.

The US and India have repeatedly emphasised the need to diversify global supply chains, reduce overdependence on specific markets, and strengthen economic security through trusted partnerships.

What the US is offering India

One of the most significant elements of the framework is the restructuring of US tariffs on Indian goods. Under the interim arrangement, the United States
will apply an 18 percent tariff rate on most imports originating from India.

This represents a substantial reduction from tariff levels imposed in late 2025, when Indian goods faced combined duties of up to 50 percent.

Half of that earlier rate — an additional 25 percent — had been imposed separately by Trump as a punitive measure tied to India’s purchases of Russian oil. Washington had argued that those energy imports were indirectly supporting Moscow’s war effort in Ukraine.

The United States has also agreed to remove certain Section 232 tariffs on Indian aircraft and aircraft parts that were tied to national security measures covering steel, aluminium and copper.

This move brings India in line with tariff relief already extended to other US allies with whom Washington has concluded trade agreements.

India will also receive a preferential tariff-rate quota for auto parts under US national security tariff rules, providing Indian manufacturers with improved access to the American automotive supply chain.

On Friday, Trump signed an executive order formally rescinding that additional 25 per cent duty. The order stated, “India has committed to stop directly or indirectly importing Russian Federation oil.”

The executive order specified that the additional tariff would be lifted at 12:01 am Eastern Time on Saturday, effectively restoring tariff rates to levels agreed under the interim framework.

Trump had earlier announced that tariffs on Indian goods would be reduced to 18 per cent following assurances from Modi regarding energy sourcing. The rollout of the reduced tariff rate is expected to take place as the interim agreement is implemented.

The 18 per cent tariff will initially apply to a wide range of Indian exports, including textiles and apparel, leather and footwear, plastics and rubber products, organic chemicals, home décor items, artisanal goods, and certain categories of machinery.

Trade experts have noted that the revised rate gives Indian exporters a slight competitive edge in the US market compared with some regional competitors.

What India is offering the US

In exchange for US tariff relief, India
has agreed to undertake sweeping tariff reductions of its own. According to the joint statement, New Delhi will eliminate or reduce tariffs across all US industrial goods, a move that significantly expands market access for American manufacturers.

India will also lower duties on a broad range of US agricultural and food products. These include dried distillers’ grains and red sorghum used for animal feed, tree nuts, fresh and processed fruits, soybean oil, as well as wine and spirits.

In addition to tariff cuts, India has committed to providing preferential market access in agreed sectors, though the framework does not list all such sectors in detail.

India has outlined an ambitious plan to purchase $500 billion worth of US goods over a five-year period. This commitment, detailed in the joint statement, spans multiple sectors and represents one of the largest import pledges India has made to a single country.

The planned purchases include oil and gas, coking coal, aircraft and aircraft parts, precious metals, and a wide range of technology products.

The technology category includes graphics processing units commonly used in artificial intelligence applications, as well as equipment deployed in data centres.

The White House confirmed that India intends to significantly expand technology trade with the United States, particularly in advanced computing and infrastructure linked to digital services.

Aircraft and aviation components feature prominently in the purchase list, aligning with additional provisions in the framework related to tariff relief and market access in the aerospace sector.

What remains out of the question

Despite these concessions, the agreement makes clear that India has drawn firm red lines around certain sensitive areas — particularly agriculture — reflecting domestic political and economic considerations.

Commerce and Industry Minister Piyush Goyal has repeatedly emphasised that the agreement safeguards farmers and rural livelihoods.

In a post on X, Goyal said the framework “completely protect[s] sensitive agricultural and dairy products,” naming staples such as maize, wheat and rice, along with soya, poultry, milk products, ethanol, tobacco, and select vegetables and meat.

The interests of our farmers remain paramount in all trade negotiations. The Modi Government remains fully committed to protecting our Annadatas and securing rural livelihoods.

No concessions have been extended to sensitive agricultural sector produce in grains, fruits,… pic.twitter.com/6QiohiyKL5

— Piyush Goyal (@PiyushGoyal) February 7, 2026

In a separate post, Goyal wrote, “In the India-US trade agreement, dairy, fruits, vegetables, spices, and other grains have been protected. This will safeguard the interests of domestic farmers, strengthen local agriculture through preferential access to such a large market, and mark another powerful step forward in the direction of a self-reliant India.”

Indian officials have maintained that while market access for certain US agricultural products has been expanded, the framework avoids exposing small farmers to sudden competition in core food staples.

Pharmaceuticals remain an unresolved area, but the framework outlines a pathway for future outcomes.

The joint statement said that depending on the results of the Trump administration’s ongoing Section 232 investigation into pharmaceuticals and their ingredients, “India will receive negotiated outcomes with respect to generic pharmaceuticals and ingredients.”

Generic drugs and active pharmaceutical ingredients are a major component of India’s exports to the US, making the outcome of the investigation a key issue for Indian industry.

What next for the India-US trade deal

Negotiations are set to be completed within six months on accepting US or international safety standards, testing procedures and licensing requirements in identified sectors.

Goyal has framed the framework as a major economic opportunity for India. He
said it would open access to a $30 trillion US market and help generate lakhs of new jobs, particularly for women and youth.

In a post on X, Goyal said, “Under the decisive leadership of PM @NarendraModi ji, India has reached a framework for an Interim Agreement with the US. This will open a $30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen. The increase in exports will create lakhs of new job…”

Both governments have said the interim framework will be implemented promptly while negotiations continue toward a comprehensive Bilateral Trade Agreement.

Goyal has indicated that the aim is to sign the full pact in March, after which India’s tariff reductions on US exports would formally come into effect.

The United States and India have attempted for years to conclude a full trade agreement, with disputes over agriculture, digital trade, medical devices and market access repeatedly stalling progress.

This interim framework represents the most substantive breakthrough in that effort to date.

With inputs from agencies